Personalization vs. Privacy: A Year of Increased Scrutiny and Heightened Expectations
One of the top 20 customer trends for 2020 is personalization. With so much personal information being collected by companies today – and with so many recent headlines regarding how companies are using that data – it’s no wonder customers expect their data to be used to their benefit.
But benefit can mean different things to different people. For instance, you may appreciate it when Netflix suggests movies to watch. But you might get the heebie jeebies when an ad for a Florida hotel pops up on your phone a few minutes after a personal conversation about visiting Uncle Ted in Florida. So what’s a company to do? How can you help your company navigate the Personalization-Privacy Paradox?
The Tug Toward Personalization
Companies that are experience-led perform better across a variety of metrics. According to Forrester, experience-led companies enjoy:
- 1.6X higher brand awareness
- 1.5X higher employee satisfaction
- 1.9X higher average order value
- 1.7X higher customer retention
- 1.9X return on spend
- 1.6X higher customer satisfaction rates
Clearly, you should be personalizing your customer experience, if you aren’t already.
Research shows that 80% of consumers are more likely to make a purchase when brands offer personalized experiences. But the type of personalization matters – a lot. According to research from Epsilon, here are the top personalized experiences that motivate people do business with a brand, by industry:
- Grocery or drug store: offers or coupons based on consumer’s physical location (29%); offers or coupons based on past purchases or preferences (29%); customized communications (25%)
- Travel and leisure brand: offers or coupons based on consumer’s physical location (35%); home page automatically shows best fares or hotel deals in frequently traveled cities (32%); offers or coupons based on past trips or preferences (28%)
- Automotive: storing purchase or maintenance history (49%); reminders of upcoming scheduled service needs (44%); allowing consumer to set up recurring maintenance for a vehicle (38%)
Notice that all the above examples provide value either through preferred pricing or with convenience and time savings. The key is understanding exactly what provides value to your customers. Most of the personal data required to provide the above is consumption history, with a little bit of location-based services thrown in. Companies have been collecting order history for decades, and collection of that data is not typically seen as intrusive. It’s not new data, it’s a new application of the data based on insights and understanding of customer behavior that’s new.
Eighty-six percent of consumers are willing to pay more for a great customer experience. In fact, by the year 2020, customer experience will overtake price and product as the key brand differentiator, according to research from Walker. What added conveniences can you offer your customers? They’ll appreciate it.
The Push Toward Privacy
At the same time, 47% of American internet users are more concerned about their online privacy compared to a year ago, based on data from Statista. Indeed, there are many minefields when it comes to privacy and security:
- Customer data breaches: Think of Target, paying $18.5 million after a breach caused by a third-party HVAC contractor
- Employee data breaches: Think of the trusted employee who inadvertently opened a phishing email and provided access to sensitive data, such as employee bank account numbers
- Sale of browsing history: Can you imagine who would be interested in buying personal browsing history on people searching a sensitive topic, like a specific disease… Insurance companies? Class-action lawyers? Pre-employment screening companies?
In addition to questions about personal data and its safety, there’s a tug of war playing out about who owns personal data. While consumers in the U.S. tend to be more willing to give up personal data in exchange for discounts or convenience, Europe has put the consumer firmly in the driver’s seat in control of personal data. With GDPR, Europe gave consumers both the right to see what data is collected, and the right to be forgotten (have your data deleted). Does your company have the capability to delete all data about a customer? Depending on your tech stack and where customer data is stored (perhaps even in emails?), most U.S. companies today would answer, “Uh, we’re working on it.”
Customer Experience Management Technology as a Business Strategy
To successfully personalize customer engagements, companies first need a solid data strategy that makes customer data usable by the different systems and people involved in providing personalized experiences, while also maintaining necessary privacy and security safeguards. This is where a Customer Relationship Management (CRM) platform comes in.
CX leaders are 4.5X more likely than other companies to have a highly integrated, cloud-based technology stack (32% vs. 7%) to fuel their customer experience management strategies, according to Adobe’s latest Digital Trends Report. And companies with a unified tech stack are 131% more likely to have significantly outperformed their top 2018 business goals (30% vs. 13%).
There are many types of CRM platforms on the market today. Some CRMs are tailored for sales, others for marketing, some for business operations, and some for customer service. There are benefits to each type of CRM, and companies might choose to implement two or four platforms, although ideally any CRM software you’re using would offer the ability to integrate to other systems.
Process Governance for a Safer Strategy: Use It or Delete It
More than just technology, many companies now employ both a Customer Experience Officer, who has authority to influence both tactics and internal processes to smooth the customer journey, and as well as a Data Governance Owner, who reviews where data sits and flows throughout the company. Together, these two key players are helping companies navigate the ever-changing water of the personalization-privacy paradox. And while changes to government regulation can take a long time (whether state or federal), consumer perception can change lightning fast as more examples of bad behavior come to light.
Most privacy experts now advocate that companies follow a simple strategy: If data doesn’t enhance your customers’ experiences, don’t collect it. Don’t store it, don’t let it sit around in emails, just delete it.
For instance, consider whether you really need to know your customer’s birthday? Does knowing that information enhance your customer’s experience? If you want to send personal birthday gifts to VIP or rewards members, the answer might be yes, but do you need to know the year? Or would it be equally effective to send thank-you gifts on Thanksgiving or anniversary gifts after a purchase instead?
5 Steps Toward Meaningful Personalization
Once you’ve committed to a CRM technology and a personalization strategy, there still may be technical or financial restraints on what you can implement. How personal you are ready or able to go depends on your business goals, how many data points you choose to collect, and how sophisticated your technology is. You might want to ease your way into a personalization strategy, learning as you go along. We’ve outlined five different stages of personalization, along with a few examples of each.
Stage 1: Canned Responses
The easiest type of personalization strategy to implement is to develop automated responses to customer inquiries or orders. For instance, an online order could trigger an automated email thanking the consumer for their business and offering a link to training resources, a customer portal, etc. This level of personalization doesn’t require the implementation of a CRM and can be done solely with an email server.
Stage 2: Segmentation
One step up would be to segment your audiences, and develop tailored responses based on the segments. Some examples of this would be customizing emails to include the name or location of the customer, or to include different offers based on gender or age. This data could be pulled from the order itself, or from your CRM if you have one.
Stage 3: Reactive Personalization
In this stage, you have established a CRM platform and are able to pull more robust customer data into your responses. You should be able to pull data to provide automated responses for different products/services/upgrades. For instance, you might respond differently to customers with VIP/reward status, who have purchased the same product/service in the past and might be interested in trying a different color/flavor/model, or to confirm the details of a particular reservation.
Stage 4: Proactive Personalization
In this stage, you are able to make personalization proactive, in addition to the reactive personalization you’ve already implemented. If your CRM platform equipped with a knowledge engine powered by artificial intelligence (AI) or machine learning, then the next time a customer lands on your site, you could use data about what they purchased in the past to provide a coupon with highly tailored product suggestions. In this way, you’re able to increase website engagement and/or conversions.
Stage 5: Individualization
The difference between proactive personalization and individualization is that you are able to make experiences consistent across all of your communication channels. No matter how a customer chooses to interact – through their computer, on their phone, through an app, via a social media purchase or through a live event – they should have an experience that feels individually tailored to them. To be able to implement this strategy requires a CRM that is able to access data from all of your channels. Customers receive highly tailored communications that are consistent regardless of channels. As a result, you may see improvements in your metrics such as online sales, site performance, and marketing ROI.
Regardless of which stage you’re in, be wary not to make personalization too intrusive on consumer privacy. Before adding personalization to every interaction, stop to think whether the interaction adds value. It’s a good idea to walk through your customer journeys to identify where personalization may contribute to business outcomes. You don’t have to get all the way to Stage 5 to add value.
Make this year the year you focus on bringing value to customers instead of just collecting their data.